Australian energy firms hammered by OPEC decision
Sydney (AFP) - Australian energy firms were hit hard Friday by the OPEC oil cartel's decision against cutting production, with stocks tumbling across the board as crude prices hit four-year lows.
Oil and gas stocks were among the biggest losers on Australia benchmark S&P/ASX200 index as the energy sector closed 7.64 percent lower.
Santos, one of the country's largest oil and gas producers, saw its shares sink 13 percent, while stocks in the world's biggest miner BHP Billiton fell 3.37 percent.
"Big energy names in commodity heavy markets such as the ASX200 are experiencing 6.0 percent plus drops, as investors finally succumb to the pressure from declining crude oil prices," IG market strategist Stan Shamu said.
"With the next OPEC meeting only set to take place in mid-2015, pessimism is likely to grow around crude oil."
Shares in Woodside Petroleum, which operates six of Australia's seven LNG processing plants, ended the day 7.07 percent lower. Origin Energy dropped 6.99 percent while Oil Search, the Australian partner in a landmark PNG gas project, declined 5.9 percent.
The Organisation of the Petroleum Exporting Countries, a 12-nation cartel that pumps out one-third of the world's oil, opted to stick by its output target even though prices have plunged by 35 percent since June.
"While today's large drop in both oil prices and energy stocks might turn out to have been amplified by the Thanksgiving holiday in the US and thin volumes, it does seem likely that OPEC's decision creates the potential for a lower range of oil prices for some time to come," CMC Markets' chief market analyst Ric Spooner said.
Spooner said oil firms with good quality and low-cost production as well as strong balance sheets would be the winners, although the OPEC decision would make new projects difficult to get off the ground.
"There is also likely to be a decline in exploration activity," he said in a note.
"Oil prices will need to return to around US$100 to support the production increases that will still be needed in the long run creating a solid outlook for low-cost producers."
